The virus and forex

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Macro Afternoon

Nordea with the note:

It used to be “two weeks to flatten the curve”, but somehow it has developed to “imprison the unvaccinated (or worse)”. Lockdownistas have been on parade also over the past week, with “ihre papieren bitte”-systems being implemented in many countries to try to boost the injection rate. Ireland has implemented a semi-lockdown with a midnight curfew. Austria has not only decided to imprison the unvaccinated (albeit so far only in their homes), the entire country is now going back into a lockdown and a nationwide vaccine mandate is launched. The vaccine is apparently so good that you need to force people in to taking it. This is unlikely to work wonders for the lack of trust in the system.

Even Sweden has thrown in the towel, moving towards vaccine passports for large gatherings starting December 1. And if that’s not enough, limits on restaurants, working from home-recommendation, and so on, will follow. In contrast, it seems as if the federal vaccine mandate for big private employers will be challenged in court, which may compromise the deadline 4 Jan. This removes some of the risk of potential very weak non farm payroll reports in Q1 due to vaccine mandates, and leaves us with a good risk/reward in paying 1y1y USD rates still, in particular now that Clarida is warning that tapering will be accelerated already in December. We expect tapering to be concluded earlier than June-22, also even if Biden and Yellen hand Lael Brainard a thanksgiving-chairmanship.

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